Private sector pay settlements are not keeping pace with inflation, according to data for May from the Labour Research Department (LRD). Earnings in the private sector may not be able to offset the effect of pay curbs in the public sector, at a time when there is already concern about the level of demand for goods and services.

The three-monthly median for May remained steady at 2%, the same as the previous month (Workplace Report, June 2010). The figure mainly reflected private sector settlements but applied across the private and public sectors, manual and non-manual groups, and in manufacturing and services. That was less than half the current rate of Retail Prices Index (RPI) inflation, 5.1% for the year to May.

There was no difference between the general level of settlements and the overall median for new agreements (excluding existing long-term deals). But on data available so far the median for new settlements in the public sector has fallen to 1%, without including attempts by local government employers to freeze pay at a national level this year. In the private sector freezes affected 13% of settlements (19% of new settlements) in the three months to May, little changed from April but down on the higher proportion of pay freezes recorded earlier this year.

The overall median confirmed a clear move upwards compared with winter/spring pay settlement trends. But unless there is a marked change, pay levels will be overtaken by higher inflation. Lewis Emery, LRD's pay and conditions researcher, said: "Although currently a degree of stability has emerged in wage deals, with the mid-point increases remaining steady at 2% from last month, pay rises of less than half the rate of inflation spell cuts in living standards for workers in general, not just the public sector."

Notes for Editors

• For further information about Payline and pay trends contact: Lewis Emery
• Payline is LRD's database of negotiated agreements reported to LRD by unions. It includes around 2,300 agreements with information on pay, terms and conditions and other aspects of the employment contract.
• Community, FBU, GMB, NUJ, PCS, RMT, TSSA, UCU, UNISON and UNITE union members have access to this database as do BFAWU officials and the TUC. For more information contact pay@lrd.org.uk
• Labour Research Department is an independent organisation founded in 1912 to produce research on behalf of trade unions and the labour movement. More than 1,800 trade union organisations, including 55 national unions, are affiliated to it, representing more than 99% of TUC membership.
• Pay settlements are negotiated rises on basic pay, and exclude bonus, increments, overtime and other allowances.
• For further information about Workplace Report contact the Editor Rebecca Johnson at rebecca@lrd.org.uk.